Motus GI Holdings, Inc.

Greetings and welcome to MODIS GI Holdings first quarter 2021 update call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to your host today, Garth Russell of Lifestyle Advisors. Please proceed.

Thank you, operator, and thank you, everyone, for joining us for the Modus GI first quarter 2021 update call. Representing the company are Tim Moran, Chief Executive Officer, and Andrew Taylor, Chief Financial Officer, and Mark Pomerantz, President and Chief Operating Officer of Modus GI. Before turning the call over to management for their opening remarks, I would like to take a minute to remind you that this conference call and webcast will contain forward-looking statements about the company. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions only as of the date of this call. We will not undertake any obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Factors that could cause actual results or outcomes to differ securely from those expressed or implied by such forward-looking statements are discussed in greater detail in our most recent filing on Form 10-K, and our other periodic reports on Form 10-Q and 8-K filed with the SEC. I would now like to turn the call to Tim Moran, CEO of MODIS GI. Tim, the floor is yours.

Thanks, Garth, and thank you, everyone, for joining us today for MODIS GI's first quarter 2021 earnings call. I'll start by providing an update on our commercial progress in the first quarter. followed by an update on each of the four value creation drivers that I first outlined during our fourth quarter call, which include product innovation, and more specifically, our recently FDA-cleared upper GI peer review system, reimbursement, clinical data, and strategic partnerships. I'll then ask Andrew to provide an overview of our financial performance for the quarter. At the end of our prepared remarks, we will open the call to take your questions. As it relates to Q1 commercial progress, I'm pleased to report that market conditions are steadily improving in U.S. hospitals, and as a result, our team continues to focus on building important customer relationships as we execute our strategy to cultivate awareness, market acceptance, and utilization of our proprietary peer-review system for colonoscopy. To date, we've conducted evaluations at more than two dozen target hospitals, most of which are prominent academic medical centers that are part of larger, multi-hospital health systems. These product evaluations have progressed at varying speeds, particularly due to site-specific impacts of COVID-19. As a result, the initial phase of our commercialization has taken longer than planned. However, I am pleased that interest in Peerview is growing. Importantly, feedback from existing users and prospective customers regarding our technology has been highly positive. We are receiving more inbound requests by physicians and hospitals interested in evaluating the peer review system, which we believe positions us very well for future commercial success. Our initial strategy has been primarily focused on key opinion-leading GIs at prominent U.S. hospital systems. During the last year, we've supported this effort through investments in digital marketing, including the creation of our Peerview podcast series, which are one-on-one interviews with GI physicians, as well as our growing compendium of clinical case studies, also available online through our website and other social media platforms. In terms of our pipeline, our sales team is expanding its outreach to regional community hospitals and IDNs. For example, in Q1, we restarted and completed evaluations at both Houston Methodist Hospital in Texas, as well as Sinai Hospital, one of the largest community hospitals in Maryland. In terms of key performance indicators in the first quarter of 2021, we delivered a 40% increase in revenue compared to last quarter. Notably, this represented our third consecutive quarter of incremental revenue growth. While revenue numbers are still quite modest relative to the very large addressable market opportunity for PureView in the U.S., we are encouraged to see a steady increase of PureView procedures conducted this quarter, both paid and as part of product evaluations, in comparison to the second half of 2020. We attribute this progress to the rebound in GI procedures at U.S. hospitals, as well as the additional training we are conducting with targeted physicians as we regain on-site access at most accounts. We now have four major hospitals signed to volume agreements, which require minimum quarterly purchases of PureView single-use sleeves in return for use of our PureView workstation. We are currently negotiating additional such agreements as well as capital purchases with key sites that we expect to close in the second quarter. Let me expand a bit further on these committed volume agreements specifically. First, these early adopter customer agreements provide us with reasonably predictable recurring sleeve revenues each quarter. Second, These agreements provide for strong gross margins as we typically command list pricing on the sleeves in return for use of the workstation. Finally, through the balance of 2021, we expect to continue to train additional physicians within each of these committed sites with the aim to grow quarterly procedural volumes at levels that exceed the minimum purchase requirements. Our commercial focus remains on establishing a strong base of PureView users who are advocates for our technology. As awareness for our solution grows, so does the opportunity to expand our reach, both within hospitals that have started to use PureView, as well as to sister hospitals within the same health system. To support our growth, we do anticipate thoughtfully adding sales resources in 2021 as needed in select areas. I want to shift gears now to our four value creation drivers. Let's start with new product innovation. I'm pleased to report that two weeks ago the FDA granted us 510 clearance for our PureView disposable sleeve designed to fit on gastroscopes for use during upper GI endoscopy. This is an exciting new market opportunity that further enhances the overall utility of PureView in the GI lab. The new sleeve uses the same peer-view capital equipment as our existing lower GI solution, and the procedures are performed at the same target hospitals by the same target physicians. Therefore, the commercial activity and customer base we've been developing will soon be able to consider using our new peer-view upper GI sleeves for another clinical application. From a clinical need perspective, in upper GI endoscopy, blood and adherent blood clots frequently obstruct the field of view for the physician as they are attempting to identify and treat the bleed source. We expect by leveraging our pulsed vortex irrigation and SmartSense suction technology that PureView can play a key role in assisting with removing these obstructions to improve visibility. Upper GI bleeds occur in the U.S. at a rate of approximately 400,000 cases per year, which expands our total addressable inpatient market in the U.S. by approximately 25%. In terms of next steps, our first priority is to leverage our FDA approval to initiate upper GI clinical case evaluations that will allow us to demonstrate clinical utility and gain learnings in collaboration with existing Peerview users. We expect to commence our pilot cases in June at key centers of excellence who will perform an initial series of approximately 30 real-world procedures. During this pilot phase, we will gain important procedural feedback and experience across a variety of different upper GI patient cases. We expect these learnings to help inform our plans for a full upper GI commercial launch. Now let's discuss reimbursement. In the fourth quarter, we submitted two reimbursement applications to CMS, one for a new technology add-on payment, which, if awarded, would provide reimbursement for Pureview in the inpatient setting and potentially serve as an accelerator to our current commercial execution. The second application is for a transitional pass-through payment, which, if awarded, would be the first direct coverage of Pureview in the outpatient colorectal cancer screening market. Securing pass-through coverage for PureView for outpatient procedures could be an important catalyst for our business, as it may provide an incentive for physicians and outpatient centers to adopt our innovative technology due to potentially favorable additional payments. Financial and health economic drivers, of course, serve only to complement the superior patient outcomes that we believe the PureView system delivers today. We expect feedback on both CMS applications by the end of 2021. We are also in the initial stages of executing our strategy to gain coverage for the peer view system by private payers. The first step in this process is aligning with an external partner to assist us in our efforts. I am pleased to report that we just signed a partnership agreement with one of the nation's top reimbursement firms who has been engaged to help us develop and implement a payer outreach program, as well as to manage a patient access and provider services platform to support reimbursement for the Peerview system. Please keep in mind that there are a variety of different avenues to obtain product reimbursement, and we've only outlined on this call our initial submissions to date. While we cannot guarantee reimbursement or favorable payment terms, This is a key priority for the company, and I'm pleased with the early progress we are making to move our plans forward. Moving to our third value creation driver, the generation of new clinical data. Last week, the journal Cost Effectiveness and Resource Allocation published a sponsored analysis of the PureView system on the outcomes of cost, quality of life, and aversion of colorectal cancers as compared to the current standard of care for outpatient colonoscopy. There are important and compelling findings outlined in this article that show the use of the PureView system has the potential to generate lifetime savings of up to $992 per patient compared to the current standard of care for outpatient colorectal cancer screening. We believe this new data could be helpful in our efforts to seek outpatient reimbursement coverage. In terms of active clinical studies, as we reported during our last call, our investigator-initiated study at the Cleveland Clinic is currently enrolling. This study is evaluating the clinical and economic benefits of using the PureView system in patients with emergent lower GI bleeding. The study is designed to enroll at least 20 patients who will undergo minimal bowel prep to provide patients a much faster time to diagnosis as compared to the current 24 to 36 hours typically required to complete a full bowel prep. The outcomes we received from this study could begin to challenge the current standard of care for critical lower GI bleed patients. We anticipate having this study completed by the end of 2021. Finally, let me reiterate our thinking as it relates to strategic partnerships. We continue to advance our dialogue with several potential strategic partners. Our focus is finding pathways to accelerate and expand our commercial efforts in the U.S. and in targeted regions outside of the U.S., enhance our technology development, and unlock value for our shareholders. As we continue to drive greater awareness and utilization of PureView in the market, we believe strategic options that fit our criteria and are actionable will become available for consideration. In summary, we are making important commercial progress and have deployed a highly disciplined and focused approach to capitalize on four value creation drivers that have the potential to enhance the trajectory of our business in 2021 and beyond. I will now turn the call over to Andrew, who will review our financial results for the first quarter. Andrew?